Is AFIN A Good Stock To Buy Now?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards American Finance Trust, Inc. (NASDAQ:AFIN).

Is AFIN a good stock to buy now? Money managers were becoming hopeful. The number of long hedge fund bets increased by 1 in recent months. American Finance Trust, Inc. (NASDAQ:AFIN) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AFIN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 10 hedge funds in our database with AFIN holdings at the end of June.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to view the fresh hedge fund action encompassing American Finance Trust, Inc. (NASDAQ:AFIN).

Do Hedge Funds Think AFIN Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in AFIN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in American Finance Trust, Inc. (NASDAQ:AFIN). Arrowstreet Capital has a $2.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Balyasny Asset Management, led by Dmitry Balyasny, holding a $2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Israel Englander’s Millennium Management, Renaissance Technologies and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to American Finance Trust, Inc. (NASDAQ:AFIN), around 0.04% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to AFIN.

Now, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in American Finance Trust, Inc. (NASDAQ:AFIN). Balyasny Asset Management had $2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new AFIN position is Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks similar to American Finance Trust, Inc. (NASDAQ:AFIN). These stocks are Foundation Building Materials, Inc. (NYSE:FBM), SI-BONE, Inc. (NASDAQ:SIBN), Core Laboratories N.V. (NYSE:CLB), Inhibrx, Inc. (NASDAQ:INBX), TCR2 Therapeutics Inc. (NASDAQ:TCRR), Brookfield Property REIT Inc. (NASDAQ:BPYU), and Kelly Services, Inc. (NASDAQ:KELYA). All of these stocks’ market caps are closest to AFIN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBM 13 77199 4
SIBN 19 163493 3
CLB 16 113946 -3
INBX 10 177132 10
TCRR 13 179036 5
BPYU 12 76324 0
KELYA 9 10589 -2
Average 13.1 113960 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $9 million in AFIN’s case. SI-BONE, Inc. (NASDAQ:SIBN) is the most popular stock in this table. On the other hand Kelly Services, Inc. (NASDAQ:KELYA) is the least popular one with only 9 bullish hedge fund positions. American Finance Trust, Inc. (NASDAQ:AFIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AFIN is 46. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on AFIN as the stock returned 22.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.